Which Gold Equities Could Have Upside Potential as Gold Shines?

Gold’s performance YTD

The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets YTD (year-to-date), rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14.

The sentiment for gold, however, has been turning around since President Donald Trump’s tweet on May 5 revived trade tensions. From May 5 to June 14, GLD has gained 4.9% compared to SPY’s loss of 1.5%. The price action in the VanEck Vectors Gold Miners ETF (GDX), which is leveraged to gold prices, is more interesting. It’s risen 14.5% since May 5.

Which Gold Equities Could Have Upside Potential as Gold Shines?

Weaker US economic reports, which include a worse-than-expected jobs report and weak inflation figures, have reignited recession fears. Moreover, trade jitters and the resulting weaker market sentiment have increased the odds of a Fed rate cut, which again is positive for gold. Read A Perfect Storm for Gold: All Macro Drivers Align for a detailed analysis of these factors.

Gold miners’ performances

Compared to gold’s gain of 4.4% YTD, GDX has gained 10.2%. Gold miners have been outperforming gold in 2019. Miners are usually a leveraged bet on gold and amplify the gains or losses in gold prices.

As expected, there have been variances in individual gold miners’ performances. Barrick Gold (GOLD), Newmont Goldcorp (NEM), Kinross Gold (KGC), and Agnico Eagle Mines (AEM) have returned 2.4%, 5.2%, 10.2%, and 15.6%, respectively.

Upside after earnings

The first-quarter earnings season for major gold miners is now over. It’s important to do a comparative analysis of these miners on factors such as costs, production, guidance changes, and debt management.

Read Gold Miners: Wall Street Optimistic after Q1 Earnings for an analyst sentiment update on gold miners after their first-quarter results and A Look at These Gold Miners’ Financial Health after Q1 Results for more information on miners’ financial health following the first quarter.